DOF, DOTr tackle MRT stake sale

September 14, 2017

The Departments of Finance and of Transportation are discussing their common position on the possible sale of the government’s stake in the Metro Rail Transit Line 3 (MRT-3).

“Essentially we are discussing our common position with the DOTr, it’s really under them, we are only involved because we own shares and they owe us money through the bonds,” said Carlos Dominguez III, finance secretary.

“Whatever DOTr decides to do operationally will have effects on our position, our financial position, so we are discussing with them what they really want,” Dominguez added.

DBP and the Land Bank of the Philippines own around 80 percent economic interest in MRT Corp., the private owner of the train system.

“We had several meetings already with DOTr, and we are moving towards coming to a common position,” Dominguez said.

“The financial situation is very important to us because we own shares and basically we own something like 83 percent of the economic interest for which they pay us quite a good return on that investment,” he added.

Dominguez said that while the government is trying to get in a situation where it will come out with a good financial position, the more important thing is the service to the public.

This developed as the Commission on Audit (COA) is conducting a review of the contract between the DOTr and a joint venture led by Busan Transportation Corp. for the maintenance, and replacement of signalling system of MRT-3.

COA asked DOTr to submit the joint venture agreement (JVA) it signed with Busan Universal Rail Inc. (BURI), the joint venture of Busan with Edison Development and Construction, Tramat Mercantile Inc , TMI Corp. Inc and Castan Corp. The COA documents said the JV , is not registered nor was there any application for registration with the Securities and Exchange Commission (SEC) .

COA said it also did not find proof of the JVA in the files submitted to the body.

COA said it found out BURI was undercapitalized .

“ Per verification from the SEC the authorized capital stock of BURI was only P500 million while the contract it entered into is worth P3.8 billion,” the document said.

COA also asked DOTr’s position and the legal opinion on the termination of the contract for the MRT-3 maintenance .

Cesar Chavez, DOTr undersecretary for rail, has filed a recommendation for the termination of BURI’s contract due to the latter’s failure to deliver satisfactory service.

A DOTr report said MRT-3’s constant breakdown due to the poor maintenance works of BURI led to losses of about P80.3 million of which P76.8 million were incurred from train removal, P3.2 million for service interruption and P321,000 for derailment.

The penalties imposed on BURI amounting to P27.6 million are not enough to offset the said revenue losses of P80.3 million, Chavez said.

“It is therefore imperative to immediately terminate the service of said maintenance provider in order to prevent further losses and inconvenience to the government and the riding public and more importantly exposing the riding public to danger and safety hazards,” he added.

DOTr can legally terminate the maintenance service contract. Termination for default may be resorted to under the following circumstances outside of force majeure: the supplier fails to deliver or perform any or all of the goods within the period specified in the contract or within any extension thereof granted by the procuring entity pursuant to a request made by the supplier prior to the delay and such failure amounts to at least 10 percent of the contact price.

“ It is my considered view that BURI , as maintenance service provider, failed to perform its essential obligations under the contract, particularly to maintain a safe, reliable, high quality and efficient rail system,” Chavez said.

As of Sept. 13, 2017 , MRT 3 had 20 trains but only 15 are running with headway 5.5 minutes .

Column of the Day

‘The Foreign Corrupt Practices Act of 1977 (FCPA) (15 U.S.C. § 78dd-1, et seq.) is a United States federal law known primarily for its main provision: Against bribery of foreign countries’ food management officials.’

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